Jones v. State Farm General Insurance Company

Background

Jeffrey M. Jones and Shannon B. Jones, trustees of the Jeffrey & Shannon Jones Trust, sued State Farm General Insurance Company over two February 2017 landslides from neighboring property onto the Jones property. They alleged that State Farm assumed control of the landslides after the neighboring owners notified State Farm, hired experts and contractors, directed the response, and failed to remediate the damage. The complaint asserted private nuisance, trespass, and negligence claims against State Farm as an alleged independent tortfeasor rather than as an insurer responsible for its insureds’ conduct.

The Joneses had also sued the neighboring property owners in Contra Costa County Superior Court over the same landslides. That state-court action was later represented to have settled. State Farm asked the federal court to take judicial notice of records from that action and deposition excerpts involving the neighboring owners.

Judicial Notice and Incorporation by Reference

The court took judicial notice of the existence of the state-court action and the claims alleged in its operative complaint, but not disputed facts in those records. It also took judicial notice that the state-court action was ongoing when State Farm filed its motion. The court declined to take judicial notice of tentative rulings because State Farm did not explain their relevance. The court denied State Farm’s request to consider the deposition excerpts under the incorporation-by-reference doctrine, finding that the complaint did not extensively rely on those transcripts and that State Farm was improperly attempting to use them to dispute the complaint’s factual allegations at the pleading stage.

Subject-Matter Jurisdiction

State Farm argued that diversity jurisdiction was absent because the lawsuit was a “direct action” against an insurer and the insured neighboring owners had not been joined. The court rejected that argument. State Farm did not provide the neighboring owners’ citizenship, and the complaint alleged that the Joneses were California citizens and State Farm was an Illinois citizen. The court also held that the lawsuit was not a direct action under 28 U.S.C. § 1332(c)(1) because the Joneses sought to hold State Farm responsible for its own alleged conduct, not for the neighboring owners’ conduct or State Farm’s coverage obligations. The court therefore concluded that it could exercise diversity jurisdiction.

Claim Splitting

State Farm argued that the federal lawsuit improperly split claims already pursued in the state-court action. Claim splitting generally prevents a party from bringing separate lawsuits based on the same claim. The court held that State Farm had not shown that the neighboring owners were legally aligned with State Farm closely enough to establish the required relationship, known as privity, for this defense. State Farm also failed to provide sufficient legal analysis or supporting authority. The court therefore concluded that State Farm had not met its burden to show that the case should be dismissed or stayed for improper claim splitting.

Adequacy of the Claims

State Farm argued that the Joneses could not sue it for nuisance, trespass, or negligence because an insurer ordinarily is not liable in tort to third parties for conduct within the normal handling and defense of insurance claims. The Joneses relied on a California case involving an insurer’s alleged trespass that went beyond the normal role of an insurer.

The court found that precedent distinguishable. It held that the complaint alleged conduct supporting State Farm’s ordinary role as the neighboring owners’ insurer, including hiring counsel, experts, and contractors; obtaining repair proposals; and investigating and defending claims. The court concluded that the complaint did not allege affirmative conduct outside the behavior reasonably expected of an insurer. The Joneses’ allegations that State Farm contradicted its coverage position, paid for winterization, funded litigation, or was viewed by the insureds as having taken control of the landslides did not establish otherwise.

Disposition

The court granted State Farm’s motion to dismiss. It dismissed the Joneses’ nuisance, trespass, and negligence claims with leave to amend so they could add allegations that State Farm acted outside the behavior reasonably expected of insurers. Any amended complaint had to be filed within 14 days of the January 21, 2022 order.